Record £1.2bn added to student loans in interest
UNIVERSITY students were hit by a record £1.2billion in interest payments added to their loan debts last year.
This means £134,000 in interest is being heaped on student debts each hour a day.
And because the overall student loan debt is increasing – the total is £122billion – the amount of interest added on looks set to become even bigger in the future.
The total amount of interest added to student loans and presently unpaid is £3.671billion.
Students automatically have their debts increased by inflation plus two per cent. After graduation the rate varies depending on how much the student is earning.
A study by the Institute for Fiscal Studies calculated that the student loans system is so expensive that more than four in five undergraduates will have their debt written off eventually after 30 years, rather than paying it off in full. Under the current system students start to pay back when they are in employment.
Tuition fees stand at £9,250-peryear and the average student debt last year was £36,000.
Figures from the Students Loan Company show the average student repaying loans paid about £1,000 back last year.
There are more than two million former students who have deductions from their pay packets.
A spokesman for the National Union of Students, said: “NUS has argued for many years that the current funding system is broken and needs radical reform. The figures from the Student Loans Company highlight how significant the debts incurred by students have become.
“This is why we need to transform our education system by scrapping tuition fees and replace them with a fully funded, lifelong and accessible National Education Service.”
Christopher Mcgovern, chairman of the Campaign for Real Education said: “Student loans have become a debt timebomb. Universities get the cash but much of the money is unlikely ever to be repaid. It is a particular scandal taxpayers have to foot the bill for what has been described as “Mickey Mouse courses”.
“Barmy ideas flourish in too many universities at a huge cost to taxpayers and at a time when other public services are crying out for funding.”
A Department for Education spokesman said: “We want everyone with the talent and potential to be able to benefit from a university education.
“Our student loans system is designed in a progressive way so graduates contribute an amount based on their income, not on interest rates or amount borrowed.
“Variable interest rates mean borrowers who benefit more also have to contribute more. Equally, borrowers are protected if their income drops, so do repayments.
“Any outstanding debt is written off after 30 years, with no detriment to the borrower.
“This is a deliberate government subsidy of higher education.”